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Study: Many Marketers Missing Key Consumers

It’s hard to believe, but in these times
awash in data and information, marketers are still reliant on old demographic media buys. And they are passing up some of their most valuable consumers in the process.

According to a study from Catalina Marketing that looked at a cross-section of CPG brands, nearly two-thirds (64%) of the ad exposures delivered by advertisers are reaching households that
account for only 2% of sales. Meanwhile, only 15% of those exposures are reaching the consumers that account for 80% of sales.

“For high-penetration categories,
that’s a large percentage of money spent on people who are not spending much,” Todd Morris, executive vice president of brand development and marketing innovation at Catalina, tells
Marketing Daily. “The fact that brands are spending just 15% of their media against consumers that represent 80% of their business presents a huge opportunity.”

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The study looked at 10 leading CPG food brands that together accounted for more than $415 million in measured television advertising spending in 2011. The study broke down 10 buyer groups
for each category to determine which consumers accounted for the most volume for each brand.

Because many marketers still rely on traditional demographic-based media plans,
all buyers -- regardless of their propensity to buy in a given category -- were treated equally, the study found. The heaviest category buyers (those who spent almost five times more than the average
household) were only exposed to 3% more advertising than the average buyer. At the same time, households that were inactive in certain categories were exposed to 30% of the advertising in that
category.

The biggest issue, Morris says, is that many brands continue to rely heavily on demographic profiles when determining media placement, despite all of the other data
available to inform deeper decisions. With so much of the industry still reliant on demographic models to determine ratings, measurement and success, much of a brand’s marketing is not as
successfully targeted as it could be.

“The bulk of spending is still against demographic targeting, despite advances in targeting,” Morris says. “The entire
ecosystem of media and advertising is built around a model that’s been there for nearly a century. And the reward systems and software and objectives and strategies and work are built around
[that] belief and platform. When you have everything engineered around that, it’s going to take a while to evolve.”

Mike, while you're right that going after heavy users is obvious (and the basis of CRM best practices), CPG marketers have traditionally not developed transaction-based predictive models of consumer opportunity due to lacking, well, transactional data. Catalina, through their panel data, can assess consumer purchases vs. media exposure, and thus seek to generate increased awareness to this issue.

As a company who thrives on response measured TV, it's my experience that it's far more effective to measure a significant response then tailor media buys maximize response. And that when response is maximized through one channel (e.g. Phone calls), it's highly likely that the media is relatively equally effective driving response through other channels. By contrast, these broad promises of massive improvement in marketing effectiveness with more and more detailed targeting share the same fallacy as all other targeting: the factors you can measure for targeting do not relate to readiness to act based on the message. Hence, they have yet to demonstrate any significant improvement in marketing effectiveness.

It's critical that we suppress these stories. There are tens of thousands of people employed in the industry who's only skill set is running the software to generate media plans based on Nielsen ratings. This new fangled method of buying TV based on performance metrics like sales is going to put all these hard working folks out on the streets. We can ill afford any more unemployed at this point. We need to keep people in their jobs, no matter how ineffective they may be, or Romney might win.

Just a thought, but maybe the 80% that make up sales are 'pretty loyal' and are repeat purchasers, so that the strategy is now to expand and start fishing where the new fish are. Have a read of Prof. Byron Sharp's book 'How Brands Grow' and he makes a pretty compelling case that brands that continue to narrow their targeting end up being really media-efficient small brands, while 'behemoth' brands (my term - Byron is much more eloquent than myself) try and appeal to everyone, either directly or through word-of-mouth.